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#The Stark Truth About the Stark Law: Part 1 - Family Practice Management

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The law addresses a wide range of services and financial relationships. Find out whether it affects you.

Alice G. Gosfield, JD

Fam Pract Manag.  2003 Nov-Dec;10(10):27-33.

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The Stark statute has generated confusion and anxiety among physicians. Such reactions are understandable given how easy it is to violate the law and how severe the penalties are. This article is the first in a two-part series intended to defuse the confusion. It explains what the Stark statute is, how it differs from the anti-kickback statute and how you can determine whether it applies to you. It also defines some of the key terms used in the statute, and describes the standards for meeting the group practice definition and how the definition applies to two of the most notable exceptions to the statute (referrals for in-office ancillary services and to other physicians in the group). The second article will focus on additional exceptions, such as those for lease arrangements and personal services contracts.

The basic prohibitions

The Stark statute applies only to physicians who refer Medicare and Medicaid patients for specific services ( designated health services, or DHS) to entities with which they (or an immediate family member) have a financial relationship. The lists of designated health services and financial relationships addressed by the statute are extraordinarily broad. To ensure you re not violating Stark, you must evaluate any economic benefits you receive from entities to which you refer Medicare and Medicaid patients to determine whether they meet any of the almost 20 detailed and complicated exceptions described in the statute (see The exceptions ).

Referrals and claims that violate the Stark statute are each punishable by a $15,000 civil money penalty, any claim paid as the result of an improper referral is an overpayment, and circumvention schemes are punishable by a $100,000 civil money penalty.

The Stark statute became effective on Jan. 1, 1995, but it was not until Jan. 4, 2001 six years later that the government released any final regulations interpreting the statute. Fortunately, the regulations are not as restrictive as they could have been, given the way the statute is written. Unfortunately, only part of the statute and several exceptions are interpreted in the regulations. This does not mean that the rest of the statute is not in force; it simply means there are many questions about the exceptions that remain unanswered. Final regulations were expected last summer, but they have not yet been published.

KEY POINTS

The Stark statute applies only to physicians who refer Medicare and Medicaid patients for designated health services to entities with which they (or an immediate family member) have a financial relationship.

To qualify for several exceptions, a practice must meet the statute s definition of a group practice.

The Stark analysis

To determine whether the Stark statute applies to a particular arrangement, ask yourself these three critical questions:

Does this arrangement involve a referral of a Medicare or Medicaid patient by a physician or an immediate family member of a physician?

Is the referral for a designated health service ?

Is there a financial relationship of any kind between the referring physician or a family member and the entity to which the referral is being made?

To answer these questions, you ll need to better understand some of the terminology used in these three questions and other parts of the statute. Then, if you determine that your answer to any question is no, Stark does not apply. If your answers to all three questions are yes, you ll need to determine whether any of the exceptions apply to your situation.

THE EXCEPTIONS

The almost 20 exceptions to the Stark statute address many different types of referrals, including the following:

To other physicians in the group,

For in-office ancillary services,

Within prepaid health plans,

To entities in which the physician is invested (including publicly traded entities, hospitals in Puerto Rico, rural providers and a hospital itself).

The statute also describes some other exceptions, such as when financial relationships include the following: